TMI Blog2017 (12) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... /- - Held that:- Based on the provisions of section 43B(a) of the Act, it is abundantly clear that employer`s contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, is allowable on actual payment basis. We note that the Assessing Officer had made the addition on account of employee’s contribution, which is factually incorrect. However, the material on record suggests that the same is related to the employer’s contribution which was allowable u/s 43B. Therefore, considering the factual position, as explained above, we do not find any infirmity in the order of CIT(A), therefore, we confirm the order of CIT(A). Addition made on account of gratuity liability - Held that:- The coordinate Bench Kolkata in assessee’s own case allowed the claim of the assessee, holding that the liability for gratuity in respect of those employees who had retired during the year is allowable u/s 40A(7)(b), even if no provision for the same had been made in the accounts. Respectfully, following the judgment of Jurisdictional ITAT, Kolkata in assessee own case, we are of the view that the order passed by the ld. CIT(A) does not contain any inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the CIT(A) is not justified in deleting the addition of ₹ 12,23,842/- made by the Assessing Officer u/s 14A of the Income Tax Act read with rule 8D of the Income Tax Rules, 1962. 5. The appellant craves leave to amend, modify and later any grounds of appeal during the course of hearing of this case. 3. Ground No.1 relates to addition of ₹ 2,30,00,000/-made by the Assessing Officer u/s 2(22)(e) of the Act. 3.1. The brief facts qua the issue are that assessee company filed his return of income, on 30.09.2008 showing total loss of (-)Rs.6,83,32,840/-. The assessee company carried on a business of manufacturing of jute goods in different varieties. The company owns five jute mills namely Hoohgly Unit, Gondalpara Unit, Waverley Unit, Bowreah Unit India Unit. The assessee company also runs, a small plastic unit namely Menakshi Poly Jute. During the assessment proceedings, the Assessing Officer noted that the assessee accepted a loan of ₹ 2,30,00,000/- from Mega Resources Ltd, in which subsidiary of the assessee company, namely Hooghly Mills Projects Ltd, was having a share holding of 13,90,100/- equity shares out of total paid up equity shares of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Assessing Officer simply stated that assessee s subsidiary company held more than 10% of the voting power and then, invoked section 2(22)(e) to assess the loan of ₹ 2.30 crores as dividend income in the hands of the assessee, which is not as per the scheme of section 2(22) (e) of the Act. The ld. Counsel pointed out that section 2(22(e) was not applicable in the case of the assessee company as it was holding only 1.7% of the voting power in the lending company M/s Mega Resources Ltd. 3.5 Having heard the rival submissions and perused the materials available on record, we are of the view thataddition of ₹ 2.30 crores, made by the assessing officer, as deemed dividend income in the hands of the assessee, is not in accordance with the bare provisions of section 2(22) (e) of the Act. The shareholding of assessee's subsidiary company to invoke the provisions of section 2 (22) (e) of the Act. We are of the view that section 2(22)(e) was not applicable in the case of the assessee company, as it was holding only 1.7% of the voting power in the lending company M/s Mega Resources Ltd. We note that the AO has erred in law as well as on facts in considering the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily Pension Fund and Provident Fund as on 1.4.2006 was at ₹ 3,74,26,843/- and employee s contribution of ₹ 12,90,273/-, ₹ 1,32,86,580/- and Rs.Nil respectively have been paid during the year (up to 31.03.2007). The assessing officer noted that under section 36(1)(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (24) of section 2 apply, if such is credited by the assessee to the employee s account in the relevant fund or funds on or before the due date, shall be allowed in computing the income referred to in section 28.These amounts were paid out of the accumulated liability. As the amount was not credited by the assessee to the employees account on or before the due date, as explained below sub-clause (va) of clause (1) of section 36, deduction was not admissible. Since the employee s contribution is not allowed under section 43B on payment basis but under section 36(1)(va) read with section 2(24)(x) and section 43B is attracted in case of employer contribution only. Therefore, deduction of ₹ 1,32,86,580/- as claimed by the assessee in the computation u/s 43B on payment basis was disallowed by AO, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at similar disallowance had been made by the Assessing Officer in his earlier assessment order i.e. for the Assessment Year 2004-05 which was fully allowed by the CIT(A) Kolkata. 4.5 Having heard the rival submission and perused the materials available on record, we are of the view that the question of disallowance of ₹ 1,32,86,580/- does not arise, especiallyin case of employer`s contribution, because u/s 43B of the Act, the amount is allowable on the basis of actual payment, irrespective of the year to which it relates. At this juncture, it is relevant to quote the provisions of section 43B (a) of the Income Tax Act, which reads as follows: 43B.Certain deduction to be only on actual payment: (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees. Therefore, based on the provisions of section 43B(a) of the Act, it is abundantly clear that employer`s contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, is allowable on actual payment basis. We note that the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 5.5 Having heard the rival submissions perused the material available on record, we note that, assessee`s issue under consideration is fully covered in favour of the assessee, by the judgment of the jurisdictional ITAT in earlier years. The coordinate Bench Kolkata in assessee s own case in the ITA No.1285/Kol/2007 Assessment Year 2001-02 and ITA No.1286/Kol/2007, Assessment Year 2002-03 allowed the claim of the assessee, holding that the liability for gratuity in respect of those employees who had retired during the year is allowable u/s 40A(7)(b), even if no provision for the same had been made in the accounts. Respectfully, following the judgment of Jurisdictional ITAT, Kolkata in assessee own case, we are of the view that the order passed by the ld. CIT(A) does not contain any infirmity. Therefore, we confirm the order passed by the ld. CIT(A). 5.6 In the result, the appeal filed by the Revenue (in Ground No.3) is dismissed. 6. Ground No.4 raised by the Revenue relates to addition of ₹ 12,23,842/- made by the Assessing Officer u/s 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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